Washington Property Tax Update Archive

Updated March 2020

COVID-19 Update

Washington State was hit early and hard by the COVID-19 pandemic.  The effects on the economy, and the implications for property values, are enormous. State and local government officials have imposed a series of restrictions with the latest being Governor Inslee’s March 23 “stay at home” order that closes all nonessential business, government and social locations as of March 25.  The order details what activities are essential and thus exempt from closure.  Major Seattle companies – Nordstrom, Starbucks, Boeing, Microsoft and Amazon – were already closing or limiting many locations.  The King County Assessor closed its physical offices on March 11 and will be operating virtually for the indefinite future.  Businesses that can function with remote workers, such as our law firm, will continue to operate in that fashion.  Taxpayers have asked about short-term property tax relief, but prospects are limited.  This year’s tax payments relate to market value as of January 1, 2019, but the upcoming 2020 values merit close attention.

Norman J. Bruns
Foster Garvey PC
American Property Tax Counsel (APTC)

Updated december 2019

Washington’s Tax on Transfers of Real Estate Is Changing

A rush to close large real estate transactions in Washington occurred at the end of 2019 due in part to a legislative amendment to the state’s real estate excise tax starting January 1, 2020. The real estate excise tax applies to sales of real estate or a controlling interest in an entity owning real estate in Washington. Through 2019, the tax was typically 1.78 percent of the real estate value, based on a state component (1.28 percent) and local component (typically 0.5 percent). The state component will change to a graduated rate structure resulting in a top combined rate of 3.5 percent:

Value -- State Component Tax Rate

• up to $500,000: 1.1%
• $500,000 to $1.5 million: 1.28%
• $1.5 million to $3 million: 2.75%
• above $3 million: 3%

Property valued at $1.8 million or more will see an overall increase in real estate excise tax under the new rate structure.

Michelle DeLappe
Foster Garvey
American Property Tax Counsel (APTC)

Updated september 2019

Is Seattle Gaining Ground in Its Quest for an Income Tax?

Washington has multiple longstanding case law precedents holding that income taxes violate the property tax uniformity clause of the state constitution. The state’s voters have repeatedly refused to amend the uniformity clause so as to allow an income tax. Despite these formidable legal and political barriers, the City of Seattle recently adopted a local income tax. This move was challenged by several groups of would-be taxpayers and eventually struck down by a King County trial court judge. The city appealed, hoping for immediate review by the state supreme court, but the high court required review by the intermediate appellate court as the next step. That review recently resulted in another loss for the city, but the court’s surprising rationale raises new concerns. Among other things, the court said the city’s existing property tax could be – perhaps must be -- imposed on income. The case is expected to move on to the state supreme court.
 

Norm Bruns and Michelle DeLappe
Foster Garvey
American Property Tax Counsel (APTC)

Updated JUNE 2019

Washington Legislature Raises New Revenue

The 2019 Washington Legislature raised substantial new revenue for the next biennium. Two notable changes: school levy limits were relaxed and the real estate excise tax was practically doubled.

The real estate excise tax applies to sales of Washington real estate and sales of a controlling interest in an entity that own Washington real estate. The tax is 1.78 percent of the sale price in most parts of the state. A new graduated rate structure goes into effect on January 1, 2020, with rates starting at 1.6 percent and quickly rising to 3.5 percent. Several other changes were made, as well.

School finance litigation resulted in the 2017 Legislature limiting local school levies in exchange for increased funding from the state. This session the Seattle school district and others persuaded the Legislature to relax those limits. The effect will vary from district to district, making property tax projections more complicated and uncertain for taxes payable in 2020.
 
Norm Bruns and Michelle DeLappe
Garvey Schubert Barer, P.C.
American Property Tax Counsel (APTC)

Updated MARCH 2019

Recently Purchased Property in Washington? You May Have Another Chance to Appeal Last Year’s Value

As the real estate market starts to lag in some sectors, some buyers are preparing to pay taxes on values that exceed the price they recently paid for the property. In Washington’s two-year system, 2019 taxes are based on the 2018 assessed values. Recent buyers may believe that they have no recourse to challenge 2018 assessments because normal administrative appeal deadlines have passed. However, several avenues may still be available. One is to petition the county board of equalization to reconvene to review the 2018 assessment of property that sold between July 1 and December 31, 2018. This avenue is only available if the sale price was less than 90% of the assessed value. The petition must be filed by April 30, 2019. Other possibilities exist for reconvening county boards under other circumstances. Paying taxes under protest is also available to preserve the option of taking the challenge to court.

Michelle DeLappe and Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated DecemBER 2018

Performance Reports on the State’s Two Largest Appeal Boards

The 2018 Legislature required the State Board of Tax Appeals to submit a detailed plan for reducing its unprecedented backlog of unresolved cases.  The Board’s report, submitted in November, can be found at http://bta.state.wa.us/wp-content/uploads/2018/11/WSBTA-Report-HB-2777.pdf.  The Board hopes to halve its present backlog by October 2023 and then maintain a pace in which most appeals are resolved within one year of filing.  But this timeline looks optimistic in light of the net reduction in pending cases reported for the 5 months since the Legislature acted.      

The King County Auditor recently completed a performance review of the King County Board of Equalization. The Auditor’s report, submitted in September, can be found at https://www.kingcounty.gov/depts/auditor/auditor-reports/all-landing-pgs/2018/property-tax-appeals-2018.aspx.  The report includes recommendations to improve communication with appellants, codify skills and experience standards for Board members, increase the amount of information shared about appeal decisions, and clarify how decisions are made on the acceptance of late evidence.

Norm Bruns and Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated SEPTEMBER 2018

Changes in the Advisory Appraisal Program

Every year a small team of Washington Department of Revenue appraisers assists county assessors on an advisory basis. (Another team of appraisers at the Department values centrally assessed properties.) Upon an assessor’s request, the Department must provide advisory appraisal assistance for locally assessed industrial properties of $25 million or more, but does so at its discretion for all other types of locally assessed property.

This year’s process differed noticeably from prior years due to a new manager for the program. His objective is to make the program more responsive to user needs. But for taxpayers, the first-year results have been disconcerting. There has been less information, less transparency and less time for meaningful input. Next year the Department hopes to improve with a written manual for the program, an earlier start on its work and an earlier target date for circulating preliminary results to the stakeholders. If your property is selected for an advisory appraisal next year, be on your toes!
 
Norm Bruns and Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated june 2018

Who’s Picking Up the Tab for Seattle’s Waterfront Redevelopment Project?

Seattle’s downtown waterfront is dominated by a double-decked elevated highway known as “the viaduct.” A 2001 earthquake started a debate about what to do with this aging piece of transportation infrastructure. The final decision was to replace the viaduct with a tunnel that is now nearing completion. Once the viaduct is demolished, the City plans to redevelop the waterfront. The City proposes to pay for up to $200 million of the cost through special assessments against properties that will increase in value due to the project. The local improvement district (LID) is surprisingly large. Details can be found at: https://waterfrontseattle.org/lid. This includes an “LID property search tool” that can be used to look up projected assessments against specific properties. Property owners have the right to protest and possibly stop the LID. If that occurs, the City will have to find another source of funds or scale back the project. If the LID goes forward, one unresolved question is whether landlords can pass the assessments through to their tenants. Property owners and tenants in the affected area of downtown Seattle should be paying attention to this now.
 
Norm Bruns and Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated March 2018

School Funding Revisited: Legislature Faces Homeowners with Sticker Shock and Unhappy Supreme Court

Last year’s Legislature adopted significant property tax changes designed to satisfy a court decision requiring the state to fully fund K-12 education.  The 2017 legislation, emanating from the Republican-controlled Senate, had two main tax features: (a) beginning in 2018, a large increase in the state’s share of the total levy rate and (b) beginning in 2019, limits on local school district levies.  Four subsequent events sent this year’s Legislature back to the drawing board.  Control of the Senate shifted in the general election; the Supreme Court made it clear that the 2017 legislation failed to achieve full funding fast enough; the state’s revenue forecast went up significantly due to the strong economy; and this year’s property tax bills shocked homeowners due to the combined effect of the state levy increase and rapidly rising property values.  Consequently, this year’s Legislature budgeted an additional $935 million for the 2018-19 school year (prompting heavy criticism that this surplus should have gone to the state’s rainy day fund) and, for taxes payable in 2019 only, the Legislature reduced the state share of the levy rate.  
 
Norm Bruns and Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated December 2017

Opportunity for a Property Tax Break on Value-Add Properties

A shopping center with nearly 40% vacancy obtained a significant property tax reduction based on what a buyer would pay for property suffering substantial vacancy. The state board of tax appeals based the reduction on a stabilized value less lease-up costs (e.g., rent lost, tenant improvements, and leasing commissions). The board rejected one element of the deductions from value, however: the margin for entrepreneurial profit required for the effort and risk value-add investors assume. Both parties had quantified an entrepreneurial profit margin as a percentage of lease-up costs. (The assessor argued against this and all other vacancy-related costs due to above-market rents on some units, but the board rejected that offset, and the assessor did not appeal.) A court recently reversed the board’s decision on this point and ordered the board to treat entrepreneurial profit as a valid additional deduction from the property’s value.
 
Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

UPDATED SEPTEMBER 2017

EHB 2242: an answer to the state Supreme Court’s call to fund basic education?

The 2017 legislature adopted significant property tax changes in an effort to comply with the Supreme Court’s mandate to improve funding for basic education. Key changes include: (1) an additional state property tax for common schools for a total state rate of $2.70 per $1,000 of assessed value (an increase from approximately $1.90) and (2) a new school district levy lid capped at the lesser of $2,500 per student or $1.50 per $1,000 of assessed value. The first part of this “levy swap” starts in 2018 while the second part is delayed until 2019. For taxes payable in 2018, everyone should expect an increase. The size of the increase will vary, but the Department of Revenue estimates a statewide increase of 6% to 8%. For taxes payable in 2019 and thereafter, when both parts of the levy swap are in place, the net effect will vary more widely. Taxpayers in some school districts will see continued increases, and taxpayers in other districts will experience decreases.
 
Norm Bruns and Miriam Korngold
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

UPDATED JULY 2017

State legislature faces an impasse, with days to a government shutdown

The state legislature’s second special session ended on June 21; Washington lawmakers remain deadlocked on the state’s next biennial budget, so Governor Inslee called legislators back for a third special session. They must produce a 2017-19 state operating budget while satisfying the state Supreme Court’s mandate in its 2012 McCleary decision to adequately fund public education. The Court gave the legislature until September 1, 2018, to fund public schools at a constitutional level, but the Court also requires a detailed plan for how to do so before the legislature can adjourn this year.

If the legislature cannot produce a budget by June 30, parts of the state government will shut down starting July 1. Gov. Inslee made clear in a June 21 press conference that while he is reluctantly preparing for that possibility, lawmakers ought to “get it done by June 30” and he does not see a reason to extend that deadline; they have “been punting for too many months.” The budget talks are occurring behind closed doors; their outcome may surprise us all.
 
Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

UPDATED DECEMBER 2016

Save Property Taxes by Rehabilitating Historic Properties

The Seattle Times recently published some “shocking” news: “the priciest home on the market in Seattle got a $0 property tax bill” due to “an obscure state law.” This is because Washington law allows reducing the assessed value of historic property by qualified expenditures for historic rehabilitation. These include direct construction costs and certain soft costs incurred within two years before the application date (October 1). The tax benefit lasts ten years.

Some savvy commercial taxpayers use this incentive to wipe out their entire tax bill. And yet, others have no idea this incentive exists. Given the state’s current construction boom (Seattle now has more construction cranes than any other U.S. city), other projects likely qualify for this significant tax savings.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated September 2016

A Carbon Cap or Tax May Affect Property Tax Values

In the very near future, Washington will either establish a clean air rule capping greenhouse gas emissions or impose a carbon tax. Either could diminish the property value of companies that face increased burdens. For carbon-intensive industries, a carbon cap or tax is analogous to the effect Prohibition had on the value of a brewery or distillery. A manufacturer of alcoholic beverages suffers extraordinary external obsolescence if those products become illegal. Limiting or taxing emissions is not as extreme as total prohibition, but the difference is only of degree. Governor Inslee’s Advisor on Carbon Markets, Chris Davis, says climate policy discussions evaluating the fiscal impacts of regulating or taxing emissions have not considered the effect on property taxes. Though this effect is overlooked, affected businesses should be alert for a potential decline in market value—and property taxes—whether Washington adopts a cap, a tax, or both.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated June 2016

Department of Revenue May Clarify the Intangible Personal Property Tax Exemption

Washington’s Department of Revenue is considering revising an administrative code provision, WAC 458-50-160, to clarify that the intangible personal property tax exemption provided by statute applies only to intangible personal property—not to attributes of that property like location, view, zoning regulations, office organization, or trained workforce. This would be accomplished by deleting the sentence that limits the exemption to only “personal property capable of being individually owned, used, transferred, or held separately from other property.” Last month, Jay Jetter from the Department conducted a public meeting to discuss the proposal. While he provided no explanation on why the change is being considered, similar sentences in other state tax laws have been a source of litigation. The deletion would be a welcome change to prevent potential disputes on this issue in Washington.

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2016

Time to File Annual Reports for Certain Tax Incentives—and Some Possible Relief for Missed Filings

Taxpayers who claim certain Washington tax incentives must file annual reports or surveys (sometimes both). Currently, a few property tax incentives require an annual report (property used for manufacture of commercial or superefficient airplanes, aluminum smelter property, certain server equipment, and property used in manufacturing semiconductor materials); none requires an annual survey. Taxpayers must file reports by April 30 or timely request an extension. Missing the filing means a steep penalty: 100% of the tax incentive amount plus interest. The Legislature recently passed a bill that would significantly reduce the penalty--in most cases to 35% of the tax incentive. If Governor Inslee allows this to become law (which is uncertain given his threat to veto bills if a supplemental budget is not passed soon), it would be a big improvement. There is no reason to impose harsh penalties on business the state wants to encourage for an inadvertent error.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2015

New Legislative Session Brings Renewed Effort for a Tax Court in Washington

Washington’s 2016 legislative session, which starts January 11, will feature an effort that merits national attention: a proposal by Senator John Braun to create a fairer and more efficient system for resolving tax disputes by forming a judicial branch tax court. The proposal deserves support from all taxpayers because it would accomplish important aims lacking in Washington’s current system while continuing to offer the option of informal proceedings. It would streamline the overall process to reduce the cost and delay in reaching a final resolution not subject to further appeal, provide a body of reliable decisions by experts in tax law that contributes to certainty and predictability in taxes, ensure fair voter representation in the election of the judges that create state tax jurisprudence, allow cases to be heard in various parts of the state for convenience of the taxpayer, and encourage mediation to resolve cases.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated September 2015

Sales with Above-Market Rents Present a Possible Tax Opportunity

With some Seattle-area properties selling for record prices, parties to transactions should pay special attention to whether the price reported for real estate excise tax reflects any nontaxable value. When above-market rents contribute to a price, that portion of the price reflects the value of contracts and business efforts. As it is not the value of the real property, it should not be taxed. Although we believe Washington law is clear on this, the Department of Revenue has been vacillating: it recently agreed that real estate excise tax does not apply to the portion of the price attributable to above-market rents, but then it changed its position. Taxpayers with strong facts should consider pursuing the issue. In doing so, presenting arguments carefully is key, whether in the affidavit reporting the sale or in a refund petition. Note that refund petitions must be filed within four years of the transaction date.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated June 2015

Disputes on How to Tax Property on Tribal Land

Taxation of property on tribal lands is a hotbed of litigation in Washington now. Significant tax amounts affecting tribes, businesses on tribal land, and others are at stake. In 2013, the Ninth Circuit barred counties from taxing improvements on land held in trust for an Indian tribe. This March, a superior court struck down a statutory exemption and payment in lieu of tax for tribal property not on trust or reservation land and used for economic development. The state’s Supreme Court will review that decision. In June, the Tulalip Tribes sued state and county authorities for collecting personal property and excise taxes from businesses, including an outlet mall, on its reservation. After the 2013 case, the Tulalip Tribes began imposing its own ad valorem tax. A win by the Tribes in this newest case would bring new tribal taxes and might support refund claims for past state and county taxes.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2014

Will Tax Appeal Reform Become a Reality in Washington?

Washington may be on the verge of an historic change improving the way it resolves tax controversies. SB 5449 would establish a tax court in the judicial branch, independent from any taxing authority. Judges with tax expertise would decide cases, with options for informal and expedited proceedings available through a commissioners department. Benefits include reducing the number of levels of appellate review for tax cases, removing political considerations from appointments of decisionmakers, and creating a clearly precedential body of tax decisions. All this is currently missing from Washington’s system. The Council On State Taxation (COST) projects that passage of this bill would raise Washington’s grade on its Tax Appeals & Procedural Requirements Scorecard from a “C” to an “A-.” Senators need to hear encouragement to support SB 5449 from taxpayers and practitioners as soon as possible. Please call your senator today.

The bill and senators’ contact information is at http://leg.wa.gov/.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2014

Tax Changes Ahead in Washington?

Washington’s Supreme Court decided in McCleary v. State in 2012 that the state falls short of its paramount constitutional duty to fund children’s education. The Court requires full funding by 2018 and interim progress reports. This September the Court held the legislature in contempt for inadequate progress. So McCleary will overshadow the 2015 legislative session. Representative Ross Hunter has proposed a partial solution: a complicated reallocation of property tax funds between the state’s portion and the local portion (see http://housedemocrats.wa.gov/roster/rep-ross-hunter/the-levy-swap/). If adopted, property taxes from wealthier counties would likely increase somewhat; taxes in less wealthy counties would likely decrease. Legislators will keep looking at other ways to raise taxes, too. To help taxpayers accept probable increases, Senator John Braun’s latest proposal for tax appeal reform may show more promise of passing. Many tax practitioners see his newest proposal for a judicial-branch system as a considerable improvement over the current system.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated September 2014

Changes In Taxation of Tribe-Owned Property

Last March, the Department of Revenue issued an Advisory stating that state and local governments cannot impose property taxes on any permanent improvements on tribal land, regardless of ownership. The Advisory claims that personal property taxes and excise taxes on tribal land will be addressed in future Advisories after consultations with stakeholders, but a recent call to the Department revealed that it is doing nothing on this front. Early indications are that County Assessors continue to assert personal property taxes against privately-owned personal property located on tribal land. Conversations with one Assessor’s Office suggest that it may be taking an aggressive view on which assets are fixtures and which are personal. In addition to these developments, the Legislature passed a new law last April that aims to subject Indian tribes to the same conditions as state and local governments with respect to property owned exclusively by the tribes.

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2014

Tis the Season: Deadlines for Administrative Appeals

Administrative appeal deadlines are fast approaching. This year's general appeal deadline is July 1 for 2014 assessments, which are the basis for 2015 property taxes. A property may have a later appeal deadline only if the county mails a value notice for the property. All counties mail notices when a property's value changes; some, such as King County, mail notices even when there is no change. To guarantee preserving your appeal rights, you can file a protective appeal by July 1 and then withdraw it if you later receive an acceptable assessment. Note also that June 30 is this year's deadline for filing a refund lawsuit for 2013 property taxes paid under protest.

Many sectors are experiencing assessed value increases as the economy recovers. If your commercial property was overassessed in 2013, you will likely wish to appeal this year. Discussing the valuation with the assessor's office may also help.

Michelle DeLappe
Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2014

What to Do If You Want to Bring a Property Tax Appeal after the Deadline?

Washington’s general appeal deadline is July 1 for the assessment that will be the basis for the following year’s taxes. You can appeal later if the county sends a value-change notice. Later deadlines apply for a refund lawsuit in court. But what if all those deadlines have passed, and you believe an earlier year should have been appealed?

There may still be hope. There are several bases for and limits on reconvening the county board of equalization on an earlier assessment. One basis is showing that the assessment was at least double the market value. Two recent taxpayer wins at the state board of tax appeals emphasize that evidence need not be definitive to prevail in a reconvene petition—a high probability that the assessment was at least double the market value suffices. In those cases, the taxpayer could then pursue an appeal of the earlier assessments.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2013

Time to Streamline Washington’s Tax Appeals System

A new draft bill from Senator Braun could resolve many long-term frustrations about Washington’s system for excise and property tax appeals by, for example, reducing the number of levels of appellate review, removing political considerations from appointments, reducing the standard of proof in property tax cases to that of other civil litigation, improving compensation by linking salaries of tax tribunal decisionmakers to that of superior court judges, and allowing temporary appointments of decisionmakers. This last point would help address the ongoing “significant backlog” at the Board of Tax Appeals, noted in the scorecard on state tax appeals processes released this month by the Council On State Taxation (COST). (Currently the BTA estimates 14 months to schedule hearings for new appeals.) Though there are many issues to work out, such as whether the legislature could enact a judicial branch tax court instead, this is certainly a step in the right direction.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated September 2013

Property Tax Exemption for Improvements on Leased Tribal Trust Land

This year has brought two major developments for businesses that lease land held by the United States in trust for an Indian tribe. First, new federal regulations clarify that, subject to applicable federal law, state and local governments cannot tax (a) permanent improvements on the leased lands, (b) activities under a lease conducted on leased premises, or (c) the possessory interest. Second, the Ninth Circuit similarly concluded that permanent improvements on leased tribal trust lands are exempt from property taxes. The decision, Confederated Tribes of the Chehalis Reservation v. Thurston County Board of Equalization, No. 10-35642 (9th Cir. July 30, 2013), involved a Great Wolf Lodge in which a tribe owned a 51% interest. The improvements were exempt from the County's property taxes regardless of their ownership. Given the court's analysis, the exemption should apply to entities with any percentage of ownership by a non-tribal business.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated June 2013

Entering the Era of E-Everything

Some counties in Washington are embracing the internet in the property tax context. One of the very few tax bills that passed in this year's legislative session authorizes assessors to email assessment notices. Citing the cost of mailing several hundred thousand notices annually, King County's assessor favored the bill. When they roll out this system (which they can do starting July 28), assessors will be able to email notices only to taxpayers who authorize doing so. If you decide to sign your company up, remember that the best practice is to use a distribution group (example: This email address is being protected from spambots. You need JavaScript enabled to view it.) instead of an individual so that personnel changes don't interfere with getting your notices. King County's appeals process also went digital this month: now online tools help Seattle-area homeowners determine if their property has been fairly valued and let both individuals and businesses file appeals and submit evidence electronically.

 

Updated March 2013

Time to Change the Standard of Review for Property Tax Valuations

In most states, if a taxpayer's value is more likely correct than not, then it prevails on the "preponderance of the evidence." But not in Washington, which received a "D" on fairness from the Council on State Tax Administration ("COST") for its more burdensome "clear, cogent, and convincing" standard.

The history behind Washington's standard suggests it was an inadvertent error. Before 1971, the preponderance standard applied before county and state boards. But courts imposed a very high and ambiguous "constructive fraud" doctrine on taxpayers. Legislators tried to provide taxpayer relief by lowering the standard in courts, but they unwittingly raised the standard before county and state boards.

This year, two bills (SB 5336 and HB 1716) would have lowered the standard to a preponderance of the evidence. But both died with the focus on passing a budget this legislative session. Better luck next year!

 

Updated December 2012

Smoothing the Path to Victory: Property Tax Refund Options

Unfortunately, the prospect of a large refund may factor against the taxpayer in settlement negotiations or case decisions despite its irrelevance to a tax appeal's merits. Washington law provides several options to provide some flexibility, however. Where the disputed tax is sufficiently large relative to the county's tax base, the parties can agree at the outset to tax an undisputed amount to avoid a large refund later. If the taxpayer ends up owing more, interest at 9% applies to the additional amount. (In contrast, in 2013 only 0.15% interest applies to refunds!) If the county owes a refund, it can raise a special tax refund fund levy or credit the taxpayer against future tax bills. County representatives may not be familiar with all the options, so the ability to inform them that they may not need to write out a check could help smooth the path to settlement.

 

Updated September 2012

Commercial Assessed Values in the Seattle Area Generally Trending Upward

Many owners of commercial property in King County (where Seattle and Bellevue are located) are seeing small increases on their assessed value notices this year. The Assessor's reports on most major commercial property types reflect higher values for January 1, 2012 compared with January 1, 2011. For major retail, values are up by approximately 5.69 percent due to more stable rents, lower vacancy and declining capitalization rates. The Assessor believes the hospitality industry is recovering, with a nearly ten percent increase in hotel values overall. Office building values similarly increased nearly ten percent, though in certain suburban areas, such as South King County, values remained flat. Warehouse and industrial properties increased less than one percent overall. Most business parks, on the other hand, showed a slight decrease in value, with an overall decrease of 1.20 percent.

 

Updated June 2012

Assessed Values in Commercial Sector Are Heading Up

The 2012 assessments out so far show rising values for commercial properties in several counties, including King County. So if your commercial property was overassessed in 2011, you will likely want to appeal the 2012 assessment. It is also good to discuss the valuation with the assessor's office. The general deadline for appealing to the county boards of equalization is just around the corner—July 2 this year. You can file an appeal in response to a value notice instead, if you receive one. All counties mail notices when the value changes. Some counties, such as King County, mail notices even when there is no change. To guarantee preserving your appeal rights, you can file a protective appeal by July 2 and withdraw it if you receive an acceptable assessment. July 2 is also this year's deadline for filing a refund lawsuit if you paid 2011 property taxes under protest.

 

Updated March 2012

Hurry Up and Wait: Appeals Backlogs at County and State Boards

Washington's county boards of equalization and state board of tax appeals are experiencing hefty backlogs. Unlike some states where local board hearings must be held within weeks, Washington's boards hear appeals all year. King County saw a tremendous increase in appeals from approximately 4,800 before the 2009 tax year to 13,200 that year. With upwards of 7,000 appeals each subsequent year, the board now typically hears appeals six to eight months after filing. The state board also has a large backlog: 2,645 cases as of February 29. For the 2012 fiscal year, only 58% of its cases reached completion within one year from filing to publication of a decision. Petitions filed now at the state board will likely take nearly a year to schedule. The recent appointment of Marta Powell to the three-member board after a vacancy of nearly three months may help ease the state board's backlog somewhat.

 

Updated December 2011

Converting from Multiple-Year to Annual Revaluation, and a Little Relief in the Meantime

Washington is moving away from multiple-year revaluation cycles. In 2011, 29 counties out of 39 revalue annually, so all values in those counties adjust simultaneously. A four-year county, for example, revalues a quarter of the property in a given year; other values remain fixed. See counties' current cycles here: http://dor.wa.gov/Docs/Reports/2011/Property_Tax_Statistics_2011/County_Reval_Cycles_AY2011.pdf. In 2012, San Juan and Mason counties plan to convert to annual.

Starting with 2011 assessments, taxpayers in multiple-year counties get a bit of a break. Boards of equalization now must accept late appeals that meet three conditions: the county did not send a revaluation notice for the assessment, the value did not change from the prior year, and the property is located in the revaluation area that year. The appeal still has to be "filed within a reasonable time after the filing deadline." This relief won't be needed long as all counties must revalue annually by January 1, 2014.

 

Updated September 2011

Did You Miss the General July 1 Deadline for Appealing Your 2011 Assessment?

Don't despair! You still have up to three opportunities to challenge your 2011 assessment:

1. Your administrative appeal deadline may not have expired yet. Several counties continue the voluntary practice of sending notices even when the value does not change. Assessors can send value notices as late as December 1, so stay on your toes! Many larger counties allow appeals up to 60 days after the notice was mailed; others allow only 30 days.

2. Now you could also approach the assessor with information supporting a lower value. The assessor can make discretionary changes for the next couple of months while the 2011 roll is open, even if you missed the administrative appeal deadline.

3. Last chance: By April 30, 2012, send your tax payment with a letter setting forth the grounds for challenging the assessed value. By June 30, 2013, commence your refund lawsuit in superior court.

 

Updated June 2011

Keep an Eye on Your Administrative Appeal Deadlines

Deadlines for the first step in administrative appeals are swiftly approaching. For 2011 assessments, which will be the basis for 2012 taxes, the general deadline is July 1, 2011. A specific property may have a later deadline, but only if the county mails a value notice. Then the deadline is 30 or 60 days (depending on the county) from the date of mailing. Washington requires value notices if the value changes. Some counties voluntarily send notices even if the value has not changed; yet a county's policy on voluntary notices can change from year to year. If you are in a county that sent voluntary notices last year, you should not necessarily expect one this year. Taxpayers unhappy with last year's assessments may want to file an appeal by July 1. If a satisfactory value change notice arrives later this year, the appeal can be withdrawn at that time.

Norman Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2011

Don’t Report Your Way Into Double Taxation

Accrual-method taxpayers on a calendar tax year can accrue Washington’s property taxes for federal income tax purposes the year before they are payable. Property taxes are recurring items that accrue when all events have occurred to establish the fact of the liability and the amount can be determined with relative accuracy, as long as the taxpayer pays the property taxes by September 15 of the following year. Before year-end all events necessary to establish the expense occur: each taxing district certifies the levy, and the assessor extends the taxes on the roll. Determining the exact amount due from each taxpayer is merely a mechanical calculation; the taxpayer can determine the amount with relative accuracy. Make sure to pay the second half of the year’s property taxes by September 15 instead of the normal October 31 deadline. Consistency is key for accrual, so make this a yearly habit.

Norman Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2010

Claim Your Deduction Now for Next Year’s Property Taxes

Accrual-method taxpayers on a calendar tax year can accrue Washington's property taxes for federal income tax purposes the year before they are payable. Property taxes are recurring items that accrue when all events have occurred to establish the fact of the liability and the amount can be determined with relative accuracy, as long as the taxpayer pays the property taxes by September 15 of the following year. Before year-end all events necessary to establish the expense occur: each taxing district certifies the levy, and the assessor extends the taxes on the roll. Determining the exact amount due from each taxpayer is merely a mechanical calculation; the taxpayer can determine the amount with relative accuracy. Make sure to pay the second half of the year's property taxes by September 15 instead of the normal October 31 deadline. Consistency is key for accrual, so make this a yearly habit.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel

 

Updated September 2010

Initiative 1098: Is It an Income Tax, an Excise Tax, or an Unconstitutional Property Tax?

Washington voters will determine this November whether the Evergreen State makes another attempt to join the ranks of states that tax income. Ballot Initiative 1098 would create a new tax at graduated rates of 5% and 9% on income in excess of $200,000 (individuals) or $400,000 (joint returns). If enacted, the initiative will be challenged under a long line of Washington cases that have treated income as "property" for tax purposes. The courts have struck down all past attempts to tax income as violating the state constitution's uniformity requirement and 1% rate cap for property taxes. I-1098 proposes to sidestep this problem by taxing the receipt of income, i.e. an excise imposed on an activity rather than taxing the income itself. As argued by former Washington Supreme Court Justice Phil Talmadge in a well-publicized letter to the Washington Policy Center, an attack on the tax as unconstitutional would likely succeed.

Norman Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2010

Values Down, But Taxes Up?

The recently mailed tax bills may have surprised you. Many taxing districts raised their levy rates, so even taxpayers whose values went down might see their taxes go up. The levy rate in downtown Seattle went up 13.4 percent, for example, and in downtown Bellevue the rate increased 14.4 percent. If value did not go down by at least as much, taxes went up. In counties on a multi-year revaluation cycle, the double whammy could be higher levy rates combined with values determined several years ago. Taxpayers who did not file an administrative appeal last year may still take another look at the values on this year's tax bills. One appeal option is a trial de novo in court. The court option does not require exhaustion of administrative remedies, but it does require that the taxes must be paid under protest with an explanation of the grounds for the protest.

Norman Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2009

Upcoming 2010 Legislative Session

As a tough 2009 draws to a close, both taxpayers and the Washington Department of Revenue have begun examining items for the 2010 legislative session. One of the areas of focus will be the high burden of proof that Washington places on taxpayers who challenge their property valuations. Currently, taxpayers must show through "clear, cogent and convincing" evidence that the assessor's valuation does not represent the fair market value of the property. This high threshold makes it difficult for taxpayers to overcome the presumption of correctness Washington affords assessor's values. By lowering this high burden of proof to the more common "preponderance of the evidence" standard, taxpayers will have a fairer opportunity to challenge property values. In past legislative sessions, this has been portrayed as an issue of concern only to business taxpayers. Today's real estate market makes it clear this is a concern for all taxpayers.

 

Updated September 2009

News from the Assessors Conference

The Washington State Association of County Assessors recently held their Annual Conference at the beautiful Sun Mountain Lodge. Three items were of particular interest. A representative from the Department of Revenue spoke about the possibility of rescinding or amending their longstanding position that sales tax should be excluded from the historical costs that are reported for personal property tax purposes. The Department may form a workgroup to study the matter, and interested taxpayers were encouraged to express their views. There was also discussion of recent funding for a further expansion of the Department's advisory appraisal team. The idea is to assist counties as they move towards mandatory annual revaluations. Advisory appraisals can be problematic, so taxpayers should proceed with caution if selected for such an appraisal. Finally, there was a spirited discussion of the distinction between real property and personal property. The distinction can make a considerable difference for a variety of tax purposes.

 

Updated June 2009

2009 Legislative Highlights

Washington's recent legislative session was characterized both by what the legislature enacted and what it failed to pass. First, in an effort to gain greater consistency between counties in their property tax valuations and to have valuations more accurately reflect market conditions, counties must value property annually for property tax purposes by January 1, 2014. As it stands now, the valuation cycles for Washington counties vary, ranging from annual valuations to valuations occurring once every four years. Second, of particular benefit to taxpayers was the failure of a bill that would have permitted counties to impose a utility tax to supplement property taxes. Finally, legislation to make the property tax appeals process more taxpayer friendly failed to pass. This legislation aimed to reduce the current "clear, cogent and convincing" standard required to overcome the assessor's presumption of correctness to a lower "preponderance of the evidence" standard.

 

Updated March 2009

Tax Assessors for King County and Pierce County in the News

The tax assessors in Washington's two largest counties have been in the news recently. Longtime King County Assessor Scott Noble was charged with two counts of vehicular assault in connection with a head-on collision while traveling the wrong way on Interstate 5. Initial reports indicated that Mr. Noble was intoxicated, and the Seattle Times published a prominent follow up story on Mr. Noble's long struggle with alcohol. Both of Seattle's daily newspapers called for Mr. Noble's resignation soon after the incident came to light, but he remains in office at this time. The new Pierce County Assessor-Treasurer, Dale Washam, is attempting to fend off budget cuts for his office by reviving the very serious charge that his predecessor, Ken Madsen, failed to comply with the 6-year physical inspection cycle required by state law. Tacoma News-Tribune coverage of the story includes details of prior recall litigation against Mr. Madsen over this issue.

 

Updated December 2008

Department of Revenue Takes the Lead in Low Income Housing Controversy

The Washington Department of Revenue has published detailed guidance on the market value of affordable housing for property tax purposes. This is the culmination of a lengthy study group process that included taxpayers and assessors, as well as various outside speakers. The two publications resulting from this study are available on the Department's web site. The Department will be following up with training sessions for both assessors and taxpayers. The hope is that this effort will bring peace to a troubled area of Washington tax law. A few states have special statutes for the property tax valuation of affordable housing, but Washington is in the majority of states that simply rely on the general concept of market value. Unfortunately, the application of that concept has been far from simple. The leadership demonstrated by the Washington Department of Revenue may be a useful example in the many other states facing the same issue.

 

Updated September 2008

How Will You Respond to the Deteriorating Real Estate Market?

Our last article reported on early indications of how assessors are responding to the deteriorating real estate market. King County – Seattle and environs – continues to stand out with value increases of 10% to 15% over last year. How will you respond? First, know your administrative appeal deadline. This is a property-by-property inquiry. Second, if your administrative appeal deadline has already expired, you can pay the resulting taxes under written protest, setting forth the grounds for protest, and then commence a refund lawsuit. The first tax payment on your 2008 value will be due on April 30, 2009. Third, consider whether your 2008 value raises uniformity concerns. The statutes call for all real property to be valued at 100% of market value. In practice, however, many assessors are as far off the mark as they have been in decades. This may allow you to make more than the usual appraisal arguments.

 

Updated June 2008

How Will Assessors Respond to the Deteriorating Real Estate Market?

There is no doubt that the residential real estate bubble has burst, but now the question is how property tax assessors will respond to that fact. In King County – Seattle and its suburbs – a somewhat surprising answer is emerging. Assessment notices have been mailed in several residential areas and a few commercial areas. In general, values appear to be increasing by 10% to 15% percent over last year. How can that be? Part of the explanation appears to be that the Assessor's office is trying to recover from several years of failing to keep up with the rapidly rising market. By 2007 King County's real property assessment ratio had fallen to a dismal 83% of market value. For the King County Assessor, who was re-elected just last fall, this may be as good a time as any to play catch up. Other assessors' calculations – both appraisal and political – will vary.

 

Updated March 2008

The Sky is Falling! The Sky is Falling!! No, It's Just Burden of Proof Legislation

The regular session of the Washington Legislature adjourned on March 13th without any major property tax changes. There were some fireworks, however, thanks to a bill that did not even advance out of committee. Bills designed to reduce taxpayers' burden of proof were introduced in both the House and the Senate. The House bill received a hearing in which assessors claimed that a reduction in the burden of proof would cause the largest tax shift in state history. This melodramatic rhetoric was picked up by the media, and it was actually incorporated into the editorial position of the Seattle Post-Intelligencer. While the scare tactic worked for this round, it was so bad that it may be good in the long run. Similar bills are likely to emerge in future sessions, and legislators will be reminded that they must be skeptical of anything they hear from the assessors on this subject.

 

Updated December 2007

Legislature Restores Property Tax Cap in Special Session

Property taxes were the agenda for a one-day special session of the Washington Legislature on November 29. The main topic was a one percent limit on annual property tax growth. This limit, which applies at the taxing district level rather than to individual properties, was first adopted when the voters overwhelmingly approved Initiative 747 in November 2001. The special legislative session was called after the Washington Supreme Court struck down Initiative 747 on the theory that it was misleading to the voters. Within days of the court's 5-4 ruling, however, Governor Gregoire and an overwhelming majority in both houses of the Legislature showed that they had no such doubts about the voters' wishes – Initiative 747 was re-enacted retroactive to tax year 2002. The court's decision has an unmistakable political look about it, yet the real politicians wanted no part of the increased taxing authority delivered by the court.

 

Updated September 2007

New Concerns Over DOR Advisory Appraisals

Washington's property tax system is administered at the county level of government for the most part. The state has a supervisory role, however, and in that role the Department of Revenue employs a staff of appraisers who are available to perform "advisory appraisals" for county assessors. Advisory appraisals can be quite problematic for taxpayers, and sometimes they even create problems for the assessor. The advisory appraisal program was contracting in recent years, but in a somewhat surprising move the 2007 Legislature funded an expansion of the Department's advisory appraisal staff. This year's assessment cycle was unaffected, but next year will be one to watch closely. Requests for next year's advisory appraisals are being considered right now. Beware if you get a letter informing you that your property will be the subject of an advisory appraisal. It may sound like a good thing in theory, but in practice it can spell trouble.